The UK motor insurance landscape is undergoing significant changes. Here's a breakdown of the latest trends and what they mean for you.
Rising Motor Insurance Premiums
The ABI's study of 28 million motor insurance policies reveals the real costs UK drivers are facing.
The average motor insurance price in Q2 2023 has surged, with insurers grappling with increasing costs.
Vehicle repair costs alone have shot up by 33%, as per the ABI's Motor Insurance Premium Tracker.
A Challenging Year for the Motor Insurance Market
2022 was a tough year for the UK motor insurance sector, as highlighted by a report from international consultants EY. For every £1 received in premiums, insurers spent £1.10 on claims and operational expenses.
Key Insights from the Latest ABI Tracker
The average premium for private comprehensive motor insurance reached £511 in Q2 2023, marking a 21% increase from Q2 2022.
Renewing motorists saw their cover costs rise by £36 to £471, while new policies averaged £566, up £21. This difference in pricing is due to the varying risk profiles between new and renewing customers.
Fair Pricing Rules
The FCA introduced rules in January 2022 to ensure that renewing customers don't pay more than new customers for equivalent policies. This applies across all distribution channels, whether it's directly through an insurer, a broker, or a price comparison site.
Why Are Premiums Rising?
Insurers paid a whopping £2.4 billion in motor insurance claims in Q1 2023, a 14% increase from Q1 2022.
Vehicle repair costs have skyrocketed to £1.5 billion, the highest since 2013, due to factors like energy inflation and pricier repairs.
Labour costs have surged by up to 40%, and replacement parts for popular cars have seen a 12-21% price hike over the past year.
Mervyn Skeet, the ABI’s Director of General Insurance Policy, commented on the situation, emphasising the challenges both motorists and insurers are facing. He encouraged those worried about affording their insurance to communicate with their providers and explore available options. Despite the rising costs, Skeet also highlighted the potential benefits of shopping around to find the best policy at a competitive price.
By understanding the market's dynamics and exploring available options, you can ensure that you're getting the best deal for your needs.